What Would You Do If Walmart Turned Off Your Gas?

by drjim on May 1, 2017

What would you do if your biggest customer decided to go it alone?

What would you do if your biggest customer decided to go it alone?

Image Credit: Wil C. Fry

I seem to recall that there is a type of fish that attaches itself to sharks, I think that it’s called a remora. This fish then gets access to all of the leftovers when the shark feeds. Not a bad relationship, eh? In the U.S. gas station business, there is a company called Murphy USA that has been in a partnership with Walmart for a long time. When Walmart would build a new supercenter, Murphy USA would show up and build a gas station out in the parking lot. This relationship served both companies well for a number of years. Now Walmart has decided that they no longer need Murphy USA. What are the Murphy USA product managers to do?

What Went Wrong With The Relationship?

Walmart has been running gas stations in front of its Sams Club warehouse chain since 1997 and in front of some Walmart stores for even longer than that. However, Murphy USA is the largest operator of gas stores at Walmart locations. This relationship is now starting to change. Walmart has informed Murphy USA that when it builds a new store, Walmart is planning on operating the gas station that will be onsite.

So why is Walmart making this change? It appears as though the Walmart CEO wants to find new ways to squeeze even more profits out of every Walmart store. Walmart is engaged in some expensive undertakings including attempting to compete with Amazon online, raising workers’ wages to $15/hour, etc. In order to fund these endeavors, Walmart has to find new sources of revenue. Although selling gas is not a high profit business, when people stop to get guess they often also purchase snacks, cigarettes, and beer and this allows the gas centers to become a source of profit for the company.

This decision by Walmart comes as a blow to Murphy USA product managers. Murphy USA currently operates roughly 1,300 gas stations and over 1,000 of these are either attached or near a Walmart store. Back in January, the Murphy USA product management team had presented Walmart with a plan to build more gas stations on Walmart properties. With Walmart’s decision to change directions, the Murphy USA product management team is going to have to come up with a new plan.

Next Steps For The Murphy USA Product Managers

What would you do if your most significant customer all of a sudden told you that they didn’t want to do any new business with you? In the case of Murphy USA they will be permitted to continue to operate the gas stations that they already have on Walmart properties. However, when Walmart builds a new property Murphy USA will not be involved in running any gas station that will be built there.

Murphy USA product managers are in the process of trying to determine what they can do now. They want to continue to expand their collection of gas stations. The big question is where will they be built? Since they will no longer be able to buy land from Walmart, they need to come up with a different plan. One such plan is to purchase land that is within one mile of a Walmart Supercenter. The thinking is that if people are going to the Supercenter, then they’ll stop at a nearby Murphy USA site even if Walmart offers a gas station on site.

Although their new stores may not be located on the Walmart property, the Murphy USA product managers see their product development definition as being a low-cost fuel provider. They view this as allowing them to compete with anyone else who is offering gas no matter if it is Walmart in their own gas stations. In the past, Murphy USA had offered Walmart customers an additional discount on their gas if they used Walmart credit and gift cards to pay for their gas. Murphy USA’s plans to add 60 new gas stations to Walmarts because these plans are already in the works.

What All Of This Means For You

The product managers at Murphy USA have had a very good run. They had an agreement with Walmart that allowed them to construct and operate gas stations at Walmart and Sams Club stores. As Wallmart grew, so did Murphy USA. However, now things have changed and Walmart has informed Murphy USA that as they build new stores they will be creating and operating their own gas stations. Now it’s time to take a look at the product manager job description and see what the Murphy USA product managers need to do next.

The reason that Walmart is breaking off their long-standing relationship with Murphy USA is because they are searching for new ways to generate more income. They now view both gasoline and the associated products that are often bought at gas stations such as cigarettes and beer as being a new source of revenue for the company. The Murphy USA product managers realize that they have a problem on their hands and so they are thinking about what their next steps need to be. If they can purchase land that is within one mile of a Walmart or Sams Club then they think that their low prices can continue to attract customers.

If you are a product manager and you have a comfortable relationship with a major supplier, the one thing that you don’t want to have happen is for them to change the relationship – that won’t look good on your product manager resume. If this does happen, you’ll have to move quickly to come up with another plan. The Murphy USA product managers have lost their relationship with Walmart and now they are going to have to find ways to still attract Walmart shoppers even though they won’t be located on store property. It can be done, but it’s going to be difficult. We need to watch how this plays out and learn from what the Murphy USA product managers do…

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: If you were a Murphy USA product manager, would you do anything to try to get back onto Walmart property?

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What We’ll Be Talking About Next Time

When it’s hot out and you are thirsty, what do you want to drink? No, I’m not talking about a beer – let’s talk non-alcoholic drinks. Due to years and years of spending on enormous advertising campaigns, many of us instantly think of drinking a Coke when we want something cold and sweet. For years the Coke-Cola product managers have been riding a very successful product. However, now things are starting to change and their sales are decreasing. What’s a Coke product manager to do?

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